Question

How should regulators view mergers, especially between suppliers and customers? Is it a good idea to discourage vertical mergers (between tire companies and cars for example)?

Answer 1

Regulators must view mergers as a way to achieve synergies between the suppliers and consumers in terms of having a supply chain with no hiccups. It is important to mention that often large funds are diverted to have more control over the process of the supply chain. Hence, it can be said that to ramp up the business suppliers and the customer can have mergers and this is to be viewed by the regulators as a method of achieving synergy and to quicken up the production process.

It is not a good idea to discourage vertical mergers because vertical mergers are a novel way to increase efficiency, productivity and at the same time it reduces efficiency and productivity. For example, a vertical merger between tyre companies and car company will lead to reduced waiting time in the production of cars. The Tyre companies continuously supplies the raw materials (tyres) to the car manufacturing company.

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